Business tax punted to help councils

2011-09-22 12:48

Cape Town - A tax on local businesses may be the only way  to help struggling municipalities meet their infrastructure obligations.

The possibility has been mooted of the country's eight metros - including Bloemfontein, Cape Town, Durban and Johannesburg - introducing such a tax, Tebogo Makube, policy manager of the financial and fiscal commission (FFC), told parliament's energy portfolio committee this week.

Makube said the only alternative available to struggling municipalities for generating their own revenue would be a tax such as this. It should then be used for the maintenance and expansion of infrastructure.

It would mean smaller municipalities, some of which have no prospects of generating revenue for themselves, could then have larger allocations towards infrastructure.

The FFC does independent specialised research and recommendations for National Treasury's distribution of revenue countrywide.

In 2008 the World Bank issued a report on the need for and costs of municipal infrastructure. Up to 2019 R500bn will be needed for municipal infrastructure such as electricity, water and sanitation. Of this amount, R421bn will be required for new infrastructure. The rest should be used to clear the maintenance backlog.

Metros and municipalities in larger cities require R271bn, and the 140 municipalities in smaller cities and large towns about R98bn. These municipalities do not have easy access to capital markets.

The 70 rural municipalities require around R131bn for infrastructure (development and maintenance).

Makube said that in 1998 about 60% had access to electricity. The figure is currently 88%, but now affordability and supply are the big problems, particularly for smaller municipalities.

Regional services levies were abolished in July 2006. They were not replaced by anything else.

National Treasury deputy director general Ismail Momoniat responded to an enquiry by saying the question of a local tax on enterprises was again under discussion, but a solution to the financial problems of certain municipalities was not clear

DA spokesperson on energy David Rossis was opposed to such a tax, which would put further pressure on the business sector. Ross warned that people already considered they were paying too much for services. 

  • Jackie - 2011-09-22 12:58

    I think we should start by spending what money is avaialble better. It is common knowledge, accepted by the ANC themselves, that local goverment cannot spend the capex already allocated and that most muncipalities are hopelessly inefficient.

  • Gierg Seiznem - 2011-09-22 13:08

    How does taxing local business promote employment? Once again, the government is trying to solve lots of problems badly, instead of solving a few problems properly. Municipalities are mismanaged. Giving them extra funds just leads to more inefficiency. Why not improve the functioning of the municipalities through stricter accountability and performance measuring? Taxing local business means even higher unemployment.

  • Met - 2011-09-22 13:11

    "Infrastructure obligations?" What a nice way of putting it. In plain English it means that they have run out of money to steal

  • Jamie - 2011-09-22 13:20

    Ridiculous. The problem isn't so much about a shortage of income, it's about how wastefully they spend that income. They'd be far better off concentrating on their core responsibilities, and letting more efficient mechanisms deal with the rest.

  • dave_23 - 2011-09-22 13:29

    What about we spend less on corruption instead?

  • SneuwelRanger - 2011-09-22 13:34

    No! City council staff and contractors are payed too much, that is why there's no money.

      Dee - 2011-09-22 15:21

      Just remember Council Staff members also pay taxes just like any other normal citizen and are just as hard hit with any tax increase.. I bet you do not work for an government institution, otherwise you will not make an comment like that

  • Sentor - 2011-09-22 13:34

    Oh great! We used to have a business levy which was ring-fenced for upgrading townships, this was protected by national legislation. Needless to say the parasites running local government used it for recurring expenditure....such as all the bling. The Johannesburg City Council elite will already be planning their expenditure against yet ANOTHER tax.

  • shrubber - 2011-09-22 13:37

    Ja, why not..... and the businesses must pass the tax on to their customers to maintain margins...... then the customers will need to reduce their standard of living/service by either reducing of cutting out the consumption of the products whose prices have been increased (or obtain such products from a nearby municipal area which has a lower or no such tax)... customers will need to cut down on costs such as electricity & water.... revenue down for the municipality.... almost by as much as the revenue increased by the implementation of the new tax..... circle of life my friends.......

  • My Father - 2011-09-22 13:39

    Business tax punted to help councils buying luxury cars.

      Kevin - 2011-09-22 15:23

      All these municipalities have double the amount of staff they need. Lets see a MASSIVE 50% retrenchment exercise as everyone in these anc municipalities has employed there Aunty and cousin . At least a million people could be retrenched and then we will not need the tax

  • JustinX - 2011-09-22 13:43

    The death of the business sector has begun. If anyone wants to invest in SA, I would say they are totally insane!!

  • AZB - 2011-09-22 14:05

    Oh my word!! The standard solution by government for their financial problems is to raise more taxes. Most SME businesses hardly cope today and we are already one of the highest taxed counties in the world. Note to the fiscus: YOU ARE BLEEDING US DRY WITH ALL THE TAXES AND ADMINISTRATIVE COSTS AND DESTROYING EMPLOYMENT. The social welfare model in SA is NOT sustainable and CANNOT be funded by a small protion of the population for much longer. In addition we don't get value for our money at the moment (taxes, rates, etc) and you want to take more? Something is not gelling for me here

  • mike881 - 2011-09-22 14:14

    They (the fat cat municipalities) have already bled the private consumers so dry that local small business are struggling in the current economic environment. Now you want to tax the small businesses even further. Not logical and will result in even more unemployment. Instead of killing the "cow" that you are milking, try and cut back on the rampant wastefull expenditure by councils/municipalities.

  • gys.smit - 2011-09-22 14:26

    This pisses me off , would not mind to pay more tax if it was used better. But all that happens is that it gets lost in tenders and corrupt officials

  • Louise - 2011-09-22 14:28

    This man must be completely out of his mind! Where are businesses supposed to get money to keep local governments going? Look what they're already paying on electricity,(how much they/ve lost due to electricity failures) and other services they're supposed to be getting from their municipalities and metros through their rates payments! Doesn't this man from the FFC realise businesses are facing a very likely double dip recession already? Why doesn't central government, starting with Treasury and the Finance Departments rather ensure that they monitor how municipalities spend grants from central government and generally get their finances better in order? Look what municipal managers who fill their own pockets earn - half of them are not even qualified with the skills to do their jobs! This FFC official has a huge cheek to image businesses and people can just pay more taxes without getting services in return.

  • resiststance - 2011-09-22 14:32

    Wow, what an utterly stupid idea, chase businesses away yeah that will sure work... If only they could take the level of creativity they apply to inventing new ways of stealing money and instead apply that to using the money they have already stolen.

  • nixcroft - 2011-09-22 14:32

    more business will close down less jobs

  • Louise - 2011-09-22 14:33

    Rather check on how much money is outstanding at municipalities and metros from GOVERNMENT DEPARPTMENTS that owe money to local government due to unpaid rates bills!

  • David - 2011-09-22 14:35

    I have a small business, if these taxes are implemented i might as well close down, i simply cannot afford it.

  • AA - 2011-09-22 14:37

    If they stop buying houses and cars for themselves and start doing what they are paid to do they won't need more money. Please Zuma put a ceiling to salaries these incompetent self appointed uneducated people are allowed to earn. We are sick of being milked!! Soon no one will be left to be milked! If they want us to fund them then we should have a say on how things are run.

      clark - 2011-09-22 15:37

      - Are they talking about those very same businesses that are battling to survive and falling like flies ? All those billions lost to corruption and thieving , now this. Just when they should be easing the burden on business, to create employment they punish them more. This country is in serious trouble , thanks to an inept, thieving Anc govt. There comes a time when one's continued presence in a country no longer makes any sense. That time has arrived for me.

  • Scorpius - 2011-09-22 15:12

    Cut the huge fat cat salaries and on the "civil servants" that sit and do no work the whole day. Employ people that want to and can do the work and the municipalities will be very soon back to their glory days

  • Judith - 2011-09-22 15:17

    Hi Everyone Join your local business chamber like Johannesburg Chamber of Commerce or the National Small Business Chamber, then we can fight this through a larger body. It will unit our voices and have more impact at the negotiating table. The Chambers and SACCI can then put across a strong case around business closures and job losses

  • Dee - 2011-09-22 15:19

    maybe government should start taxing the Taxi Industry which is exempted from most of the current tax regulations... eg.. They are exempted from paying tollfees in Gauteng...

  • Kevin - 2011-09-22 15:21

    Why must companies be taxed to sort out useless municipalities who keep providing services to non paying thugs

  • gcr - 2011-09-22 15:36

    If local government intoduce such taxes then the entities that they garner the taxes from, must have an absolute say in how the funds are applied. These taxes need to be seen as being extracted for a specific purpose and must not be included with all other forms of taxes currently collected

  • M - 2011-09-22 15:41

    Okay, it has been about 15 years since I last worked in accounts but way back then our company paid a Regional Services Levy for each branch that it had to each municipality that the branch was in over and about electricity water rates and taxes etc, etc. Whatever happened to those?

  • Robbie - 2011-09-22 15:56

    and this will cause more businesses to close, thereby negating the brilliant plan! Not to mention the job losses and loss of income tax to SARS... where do they come up with these ignoramuses?

  • Jim - 2011-09-22 16:05

    Try employing educated honest people with the correct credentials, and stop stealing the money, then you will have adaquate funds with your present budgets. People are tired of handing over money and getting nothing in return.

  • Tolerant - 2011-09-22 16:14

    We should rather focus on getting rid of bad debts by handing people / businesses over to debt collectors and attorney's. If they refuse to pay, list them as bad payers.

  • Shane - 2011-09-22 16:40

    It's fine. Raise the taxes, introduce new taxes, whatever you want. I'll startup in Australia or New Zealand, and there will be many more who will do just the same.

  • Davearch - 2011-09-22 17:43

    Why should business PAY for ANC incompetence and corruption ?? DONT PAY A CENT !!

  • Boerseun - 2011-09-22 18:13

    That would kill most small businesses of, leading to more job losses, loss of tourist trade and even gost towns.

  • errol.wagner - 2011-09-22 18:20

    It will only mean more money to steal and mismanage. There is a big hole where all the money disappears.

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